Japan's JFE to focus on lighter steel in $6 billion upgrade, warns on U.S. trade policy

TOKYO (Reuters) - JFE Holdings Inc, parent of Japan’s second-biggest steelmaker, plans to spend more than 650 billion yen (£4.3 billion) over the next three years upgrading domestic production facilities in a bid to raise productivity and competitiveness.

Eiji Hayashida, CEO and President of JFE Holdings Inc., speaks during an interview with Reuters at the company's headquarters in Tokyo, Japan, February 14, 2018. REUTERS/Toru Hanai

A key goal of the capital expenditure plans, outlined by JFE Holdings President Eiji Hayashida in an interview on Wednesday, will be to help the firm meet growing demand from the auto industry for lighter steel and new materials to make electric and other cars of the future more fuel-efficient.

The pivot comes as Asia’s steelmakers seek to make the most of still-robust demand from China. But while sales in the world’s second-biggest economy offer hope, festering tensions on global trade as U.S. President Trump ponders tariffs and quotas on imports of steel and aluminium are becoming a major headache for industry executives like Hayashida.

“We’ve spent a bit more than 650 billion yen in the past three years on domestic facilities and we will need to do it again for the next years, which would give us a very competitive foundation,” Hayashida told Reuters.

“We may even increase spending,” he said, with Japan home to most of JFE’s crude steel manufacturing. Details of JFE’s new business plan through March 2021 will be announced around April.

“I think we don’t have to worry about China (economic) risk, at least this year,” Hayashida said, warning he sees slower Chinese demand from next year.

“My biggest fear is how far President Trump will close down trade,” the executive said. “If the U.S. takes action (to curb imports), it may trigger retaliation by other countries. What is most troublesome is to see the world heading to protectionism.”

AUTOS CHALLENGE

Japan’s steelmakers, including JFE’s bigger rival Nippon Steel & Sumitomo Metal Corp, are making hefty investment in ageing domestic plants. Glitches at the plants - some more than 40 years old - have prevented them from manufacturing as much steel as they would have liked, as well as more modern products.

Eiji Hayashida, CEO and President of JFE Holdings Inc., poses for pictures next to the company logo after an interview with Reuters at the company's headquarters in Tokyo, Japan, February 14, 2018. REUTERS/Toru Hanai

Steel has dominated car material usage for over a century, but it now faces fierce competition from rivals such as aluminium and carbon fibre reinforced plastic (CFRP) as automakers turn to lighter materials to make more fuel-efficient cars.

“For both electric vehicles and gasoline-powered cars, demand for shedding weight will only get stronger,” Hayashida said.

“Automakers see there is still room to cut the weight of gasoline car by 10-15 percent. We will mainly pour resources into such efforts,” he said, pointing to advanced high-tensile steel and new components to be created through cooperation with chemicals manufacturers.

JFE said in December that it and a unit of Mitsubishi Chemical Holdings have jointly developed lightweight car door panels by combining steel and carbon fibre reinforced plastic (CFRP).